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TMI Blog2017 (6) TMI 481X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of Hon’ble Delhi High Court in CIT V/s. Ansal Land Mark Township (P) Ltd.(2015 (9) TMI 79 - DELHI HIGH COURT) and examining the fact of the case before us, we find that issue is squarely covered by this judgment and are of the view that if the impugned interest expenditure on which tax has not been deducted u/s.194A and if they have been offered to income by the recipient and due taxes has been paid, then no disallowance is called for in the hands of assessee. We accordingly set aside this issue to the file of Ld.AO and direct the assessee to produce necessary evidence including certificate from Chartered Accountant of the non banking finance company’s certifying that the interest received from assessee is forming part of the gross revenue of these non banking finance company which have been duly offered to tax in their return of income. Needless to mention that Ld.AO will provide sufficient opportunities of being heard to the assesse. In the result this ground of assessee is allowed for statistical purpose. - ITA No.3118 & 3063/Ahd/2013 - - - Dated:- 25-5-2017 - SHRI RAJPAL YADAV, JUDICIAL MEMBER, AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Assessee : Mr.Vart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled for, perused the peak credit amount supplied by the assessee and partly deleted the addition of ₹ 84,68,293/- (by mistake Ld.CIT(A) has mentioned the deleted amount at ₹ 94,68,293/-) and confirmed the addition of ₹ 61,09,368/- being total of individual peak credit of five parties. 4. Aggrieved both assessee and revenue are in appeal before the Tribunal. 5. Assessee has raised following grounds of appeal: 1. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming addition to the extent of ₹ 61,09,369/- [wrongly towtalled at ₹ 51,09,368 at page 37 of the order the learned CIT(A) u/s.68 of the I.T Act in respect of the following parties: Rs. (a) M/s. J.P. Corporation 14,61,700 (b) M/s. Swastik Corporation 18,38,139 (c) M/s. Sun Shine Corporation 16,40,000 (d) M/s. Shankeshwar Corporation 2,86,235 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, the Ld.Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad ought to have upheld the order of the Assessing Officer. 3). It is therefore, prayed that the order of the Ld.Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad may be set-a-side and that of order of the Assessing Officer be restored. 7. From going through the grounds of both the parties we observe that ground no.1, 2 and 3 in assessee s appeal and ground no.1a and 1b of Revenue s appeal are in relation to the addition of ₹ 1,45,77,661/- made by the Ld.AO u/s.68 of the Act. We first take up this issue. 8. Ld.AR submitted that during the course of assessment proceedings, assessee was asked to prove the identity, creditworthiness and genuineness of 15 parties from whom total loan of ₹ 1,45,77,661/- was taken. However, assessee could not produce any evidence to explain the source of impugned cash credit. During the appellant proceeding assessee submitted additional evidences alongwith affidavits with respect to the loans taken during the year. Detailed examination was made by Ld.CIT(A) after admitting additional evidence. Ld.CIT(A) has rightly deleted the addition of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel. Issue raised by both the parties in various grounds as discussed above revolves round the issue of addition u/s.68 of the Act at ₹ 1,45,77,661/- made by the Ld.AO. It is a fact that during the assessment proceedings assessee couldn t satisfy the three limbs i.e identity, creditworthiness and genuineness of cash credit/unsecured loans at ₹ 1,45,77,661/- even after being providing various opportunities. Thereafter when the matter came up before the Ld.CIT(A),assessee filed additional evidence to explain the impugned cash credit and also filed affidavit by the Director that Audited balancesheet, bank statement, details of loans accepted in book of accounts, were produced before the Assessing Authority. However, Ld.AO without making any further enquiry from appellant simply resorted for addition u/s.68 of the Act. We find substance in the order of Ld.CIT(A) admitting additional evidence by following the judgment of Hon ble Apex Court in the case of CIT V/s P.K. Noorjehan(1999) 155 CTR (SC)509 wherein it has been held that unsatisfactoriness of the explanation does not and need not automatically in deeming the amount credited in the books as the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- Total Rs.1,28,97,133/- Rs.61,09,368/- 13.1 We further observe that Ld.DR has pleaded about non application of peak theory in the case of assessee which we find not to be correct in the given facts and circumstances because the basic about opening balance of such cash credit, how much cash/fund had come from known and accept sources where the fund has flow are not on record. It is only the negative figure i.e shortage of fund which is unexplained needs to be added to the income of assessee. 13.2 We find it pertinent to reproduce the detailed findings of Ld.CIT(A) on this issue of application of peak theory which reads as under: 5.2 Now coming to ground wise adjudication : (A) Ground No. 1 is general and Technical to treat the assessment order as bad in law and requested to be quashed. The appellant has not substantiated this ground. No explanation or submission made in respect of this ground. As discussed at para 4 above, there is; no infirmity of any kind by which the impugned assessment order can be held as bad in law. This ground is therefore dismissed. (B) (i) Ground No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows: (a) (i) M/s. J.P. Corporation : As per the details of unsecured loans given in tabular form with opening balance, Addition /repayment and closing balance as filed by appellant with affidavit of Sh. Sanjay Shah, director of the appellant company dt. 09/02/2012 there is NIL opening balance, during the year ₹ 14,61,700/- were received from this party while ₹ 13,17,177/- were repaid leaving the closing balance of ₹ 1,44,523/-. The appellant in the paper book dt. 09/02/12 (page 1 to 103) as per index discussed at para 4B above has not submitted any ledger account, address or PAN for this party. The appellant submitted copy of his corporation bank account No. CC/01/990008 where on 05/02/08 a cheque form Bank of India (cheque No. 0924981) for an amount of ₹ 6,08,700/-received and cleared to say that the same was received from M/s J. P. Corporation. In respect of second entry of ₹ 8,59,000/- [Rs. 859000 + 602700 = ₹ 1461700] it is contended that the same is Journal entry. The appellant in its submission dt. 22/02/13 for the first time submitted that - Further in the case of J. P. Corporation the amount of ₹ 14 lakh has been r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 0756647 amount of ₹ 2,00,000/- got cleared in the name of J. P. Corporation (There is no such entry in appellant's details) (iv) On 18/05/2007 vide cheque No. 0756650 an amount of ₹ 1,00,0007- got cleared in the name, of J. P. Corporation (There is no such entry in appellant's details), (v) On 18/05/2007 vide cheque no. 0756648 an amount of ₹ 79250 got cleared in the name of J. P. Corporation. (vi) On 21/05/2007 vide cheque no. 0756653 an amount of ₹ 1,79,250 got cleared in the name of J. P. Corporation (there is no such entry in appellant's detail) (vii) On 11/07/2007 vide cheque no. 0756786 an amount of ₹ 5,07,000/- got cleared in the name of Shashank and not of J. P. Corporation. (viii) On 25/09/2007 vide cheque no. 197587 an amount of ₹ 2,92,761/- got cleared in the name of Radha swami and not of J. P. Corporation. (a)(v) It is therefore, the appellant neither given PAN, confirmation, address of this party nor submitted correct credible details. The appellant failed to discharge its onus of establishing identity, genuinity and creditworthiness. It is undisputed that appellant admitted to rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al proposition is writ large in the face of the contention. The assessee-company received the share monies; it even says that the communications sent by it at the addresses did not return unserved, yet when the AO requested it - that too only after trying to serve the summons unsuccessfully - to produce the principal officer of the subscribing companies, the assessee developed cold feet and said it cannot help if those companies did not appear and that it was for the assessing officer to enforce their attendance. It needs to be remembered that the AO did not merely stop with issuing summons; he followed it up with a visit by the inspector who confirmed that no such companies functioned from the addresses furnished by the assessee. Let us see the attitude of the assessee towards discharging its onus in such circumstances. It says that the AO may get the addresses from the ROC's website. We do not think that an assessee can take such an unreasonable attitude towards his onus u/s. 68, little realizing that when the finding is that the subscribing companies have not been found existing at the addresses given by the assessee, it is open to the AO to even hold that the identity of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the creditor/subscriber is now judicially accepted as one of the ingredients of the onus cast on the assessee under Section 68, we do not see how proof of the resources of the creditor/share subscriber can be completely excluded from the sweep of the burden. It may not be required of the assessee to give in-depth particulars and details about the resources of the creditor or the share subscriber, but the minimum required of him would be, in our opinion, information that will prima face satisfy the AO about the creditworthiness mere furnishing of the copies of the bank accounts of the subscribers is not sufficient to prove their creditworthiness. There must be, in our opinion, some positive evidence to show the nature and source of the resources of the share subscriber himself and therefore it is necessary for him to come before the AO and confirm his sources from which he subscribed to the capital. (a)(vii) The ratio of this judgment was followed by Delhi High Court in the case of CIT Vs. Titan Securities Ltd. (2013) 215 Taxman 164. It is therefore all the three ingredient viz. identify, genuinity and credit worthiness has to be proved by assessee independently. Here in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt of ₹ 3,00,000/- dt. 29/11/07 vide ch. No. 226281 but appellant reflected only ₹ 1,75,000/- also contra a/c duly confirmed reflect ₹ 1,75,000/-. (b)(iv) In reference to Sunshine Corporation (i) There is no entry or reference for payment by appellant dt. 12/04/07vide ch. No. 756616 for ₹ 228000 (ii) There is no entry of payment by appellant of ₹ 5,00,000/- dt. 13/03/08 vide ch. No. 0197861, ₹ 5,00,000/- dt. 17/03/08 vide ch. No. 0197863 and ₹ 6,00,000/- dt. 17/03/08 vide ch. No. 0197862. (iii) The entry of ₹ 4,00,000/- dt. 03/01/08 vide ch. No. 197689 as stated to be payment by appellant is in the name of Shri S. T. Desai. (b)(v) It is therefore, the contra account confirmation so submitted by appellant are not proper and examination of such party becomes important relevant. The A.O. in the remand report certified that loan receipt entry through Journal entry was claimed to be payment made by M/s Nandan Trading Co. for which appellant filed contra a/c, PAN, Confirmation and discharged the onus casted and hence not to be disbelieved. There is no discrepancy as far as receipt of loan except one as that of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sonal D Shah 125000 (e) SmitaKobawala 400000 168028 It is therefore out of remaining addition of ₹ 1,28,97,133/- considering the rotational transaction, the peak credit as confirmed / upheld are as follows: (a) M/s J P Corporation 1461700 (b) M/s Swastik Corporation 1838139 (c) M/s Sun Shine Corporation 1640000 (d) M/s Shankheshwar Corporation 286235 (e) M/s Sun Corporation 883294 Total 6109368 The addition u/s 68 of the Act to the extent ₹ 6109368/- are upheld. It is therefore the A.O. is directed to delete the balance addition of ₹ 84,68,293/- (1,45,77,661 - 51,09,368). The appellant gets part relief. This ground is partly all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereas sundry debtors appear on the asset side of the balance sheet and, therefore section 68 is not applicable to trade credits. The above is true of genuine cash credits and not of credit entries which are held to be nongenuine. The strong reliance of the assessee on the decision of Hon'ble Supreme Court in the case of CIT v. Smt. P.K. Noorjahan(supra) is also not of any avail. The decision was given on the peculiar facts before the Court and is not applicable to the facts and circumstances of the case before me. Therefore. I do not find any substance in the submissions advanced by Shri J.P. Shah except the one relating to the working of the addition. 6.2. That on treating credit entries as non-genuine, the amount introduced has been taken to be assessee s deemed income. All the credits have been added without bothering to know as to what was the cash available with the assessee on a given date on which it was introduced in the books of account as receipt from the customer. The Assessing Officer has not been mentioned dates of credits. It is also not available on record as to what was the opening balance with the assessee and how much cash he had from known and acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s partly allow and ground no.1b relating to admitting the additional evidence stands dismissed. 15. Now we take up ground no.4 of the assessee against order of Ld.CIT(A) confirming addition of ₹ 3,20,000/- u/s.68 of the Act. At the outset Ld.Counsel for the assessee requested for not pressing this ground. As assessee has not pressed this ground we dismiss this ground as not pressed and confirm the addition of ₹ 3,20,000/- u/s.68 of the Act in respect of trade credit in the name of Shri Preyash M. Zhaveri(HUF). In the result this ground of assessee is dismissed. 16. Now we take up ground no.5 in assessee appeal, against order of Ld.CIT(A) confirming disallowance u/s.40(a)(ia) of the Act of interest paid to Non Banking Finance Company at ₹ 1,37,745/- At the outset Ld.Counsel for the assessee submitted that issue in this appeal is squarely covered by the judgment of Hon ble High Court of Delhi in the case of CIT V/s Ansal Land Mark Township(P)Ltd.[2015] 61 taxmann.com 45 declaring amendment made in section 40(a)(ia) through Finance Act 2012 is declaratory and curative in nature and should be given retrospective effect from 01/04/2005. Ld.Counsel accordingly r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee fails to deduct tax in accordance with the provisions of Chapter XVII B. Where such Assessee is deemed not to be an assessee in default in terms of the first proviso to sub-section (1) of Section 201 of the Act, then, in such event, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso . 10. It is pointed out by learned counsel for the Revenue that the first proviso to Section 201(1) of the Act was inserted with effect from 1st July 2012. The said proviso reads as under: Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident- (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estrictions should, therefore, not come into play when an assessee is able to establish that there is no actual loss of revenue. This disallowance does deincentivize not deducting tax at source when such tax deductions are due, but, so far as the legal framework is concerned, this provision is not for the purpose of penalizing for the tax deduction at source lapses. There are separate penal provisions to that effect. Deincentivizing a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to examine whether or not, on a fair, just and equitable interpretation of law- as is the guidance from Hon'ble Delhi High Court on interpretation of this legal provision, in our humble understanding, it could not be an intended consequence to disallow the expenditure, due to non-deduction of tax at source, even in a situation in which corresponding income is brought to tax in the hands of the recipient. The scheme of Section 40(a)(ia), as we see it, is aimed at ensuring that an expenditure should not be allowed as deduction in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ITAT in adopting the ratio of the decision of the Agra Bench, ITAT in Rajiv Kumar Agarwal's case (supra). 16. No substantial question of law arises in the facts and circumstances of the present case. The appeal is dismissed. Para 8 to para 16 19. Respectfully following the judgment of Hon ble Delhi High Court in CIT V/s. Ansal Land Mark Township (P) Ltd.(supra) and examining the fact of the case before us, we find that issue is squarely covered by this judgment and are of the view that if the impugned interest expenditure on which tax has not been deducted u/s.194A and if they have been offered to income by the recipient and due taxes has been paid, then no disallowance is called for in the hands of assessee. We accordingly set aside this issue to the file of Ld.AO and direct the assessee to produce necessary evidence including certificate from Chartered Accountant of the non banking finance company s certifying that the interest received from assessee is forming part of the gross revenue of these non banking finance company which have been duly offered to tax in their return of income. Needless to mention that Ld.AO will provide sufficient opportunities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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